3 Important Reasons to Diversify Your Company’s Deposits

diversify company deposits, municipal deposits

It’s October, 2007. The stock market is at an all time high, and municipal and company depositors are feeling good. I mean, sure, the Wall Street experts say the bubble has to pop eventually, but these CFOs and corporate finance gurus have all their money in banks that have been around FOREVER. What could happen?

The Recession happened, that’s what. And in that space of just a few years, banks that had been around for decades or even nearly a century like M&I Bank right here in Milwaukee failed.

Want to avoid this kind of catastrophe? Here’s how:

Diversify, diversify, diversify.

Our friends in real estate say the three most important words are location, location, location. In finance, our three most important words are diversify, diversify, diversify.

    1. Protect your assets

      Why? For starters, you don’t know what the future holds. Right now, the economy is great, but that could change. Just because your bank has been around for years and hasn’t failed before doesn’t mean it won’t fail in the next economic downturn.

      The best way to protect yourself is to spread your funds across many different banks, that way, if one or two or even three fail, it only affects a small portion of your assets.

    2. Build relationships to help meet future needs

      And even if the economy stays great from now to infinity, you still don’t know what the future holds. As your business or municipality changes, your investment needs change. What’s working for you now may not work five or ten years down the road.

      If you’ve already opened accounts at a diverse group of banks, you’ll have the foundations for relationships that could help you find new financial products that meet your needs down the road.

      Just because The Bank Around The Corner has served you well for the past seven years doesn’t mean you won’t need a different set of options as your funds grow.

    3. Stop fraud

      Again, we don’t have to look outside of Milwaukee for an example here. The VP of Finance at Koss Corp., the maker of those iconic headphones, embezzled $34 million from her employer of 15 years, money she spent on shopping and lavish vacations.

      While we don’t know the state of Koss’s accounts at the time of the embezzlement back in 2009, we do know, the more third parties you have looking at your funds, the more likely you are to catch fraud before it happens. The more eyes on your accounts, the better.

How to do this?

Opening accounts at diverse banks across the country can totally be done by your finance and accounting team. But here’s the thing: it takes a lot of legwork.

One client of ours had accounts at 144 banks before they worked with us. Their CFO would scour the papers for the best rates over the weekend, call the banks during the week to negotiate rates, and do the same thing all over again the next week. That took valuable time out of his days, time he could have spent on more important tasks.

ADM does that sort of work for you. We open the accounts, find the best rates, negotiate with the banks, and give you one statement (as opposed to 144 statements from 144 banks) with all of your bank accounts listed on it. You can still hand pick the banks you want to work with and the types of products you need, you just don’t have to do the legwork any more.

Ready to learn how ADM can help diversify your funds? Let’s talk.